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National Sunday 29 April 2012 - 07:05

Grandson of former National Bank chairman takes Lino Spiteri to task

The grandson of the former National Bank of Malta chairman, Antonio Cassar Torregiani takes the former Socialist minister Lino Spiteri to task in long letter copied to MaltaToday.

The Mintoff government was typified by years of aggressive take-overs, corruption and violence Jeremy Cassar Torregiani, the grandson of the founder of the National Bank which was nationalised by socialist prime minister Dom Mintoff, has reacted strongly to a letter published in The Times by Lino Spiteri. Spiteri - a former minister with the Mintoff government who was later 'rehabilitated' by the PN leaning media for opposing Alfred Sant - has raised the ire of Cassar Torregiani. In a long letter he copied to MaltaToday, Cassar Torregiani said: "For Lino Spiteri to imply that the National Bank was being run badly, or that it was experiencing an internal crisis is a lie that cannot under any circumstances be allowed to prevail.

Read the full letter below: Following the embarrassment that the National Bank of Malta case - once again portrayed in the recent documentary Dear Dom - puts on the establishment, Lino Spiteri has now written to The Times of Malta, to clarify to its readers three facets of the saga that he feels have been misinterpreted and that need to be put right. Having been so closely involved in the issue from its inception, while at the Central Bank (and also as a member of parliament, a shadow finance minister as well as finance minister... and finally, as an interviewee in the aforementioned documentary) it definitely makes sense that he does. As he puts it, and in his own words, he would like to clarify "three facets to what happened late in 1973. One is technical: the state of the bank as revealed in its reports to and inspections by the Central Bank. The other refers to government involvement when the run on it threatened to decimate the group. The third factor concerns legal actions taken by former shareholders of the National Bank". To give the reader adequate background to this event, it is pertinent to mention that the National Bank of Malta was founded in 1946, just after World War II by Antonio Cassar Torreggiani who joined the then Anglo Maltese Bank and the Banco Di Malta together. Subsequently, in 1949, Joseph Scicluna et fils (Cisk) joined Scicluna's Bank in to the Group, with B.Tagliaferro and Figli also joining up with them in 1969. The reason why I emphasise this point, is to show a trend of a wholly-owned Maltese enterprise that grew from strength to strength, pooling together Maltese resources under the umbrella of the National Bank of Malta. By 1972, the bank had achieved its record year to date, with its auditors reporting a total of Lm240,000 in profit for the year and, apart from reports by the Central Bank that the group was, in their opinion, "too heavily exposed to the property market", everything was running smoothly. In 1973, the interim results actually showed an even better performance by the National Bank of Malta, and by the end of its last year of operation - i.e. 1973 - the bank's profit on ordinary activity before provisions and extraordinary items was 32% better than its previous best ever year. For Lino Spiteri to therefore attempt to imply that the bank was being run badly or that it was experiencing an internal crisis is a lie that cannot, under any

circumstances, be allowed to prevail. Any business that is experiencing record-breaking results cannot possibly be rendered as failing due to the sole interpretation of an 'inspectors report' which felt that the Banks's exposure to property was too high. With the added benefit of hindsight, one can today easily see just how false this argument is. For example, if I were to choose to invest heavily in gold and my stock broker brings it to my attention that perhaps my portfolio is unbalanced and that it has too much gold in it, whether this was wise or not will solely depend on the future price of gold. Punishing the National Bank of Malta for investing heavily in the Maltese property market is pure hypocrisy and ridiculous, especially (again) with the benefit of hindsight, as ever Maltese person knows that whoever bought property in Malta and held it from 1973 till today would be sitting on the investment of a lifetime. My conclusion therefore, to Spiteri's first point, is that the Central Bank inspectors would have applied a standard formula used in normal banking practice and brought this to the attention of the National Bank of Malta - that in its opinion, it was over standard banking practice at the time in its exposure to the property market. That this however, was then used as the basis for its eventual unjustifiable take over for zero compensation - not 1 cent - is the act of theft that the government of the day orchestrated to the detriment of the innocent Maltese shareholders. Yet again, today, hindsight only adds further weight to my argument as everybody knows that investing in the Maltese property market since 1973 cannot be considered to have been a bad investment in any way whatsoever. Unfortunately, in cases like this, nobody can predict the future with complete certainty, so even what is so obvious today to us all, would have at the time been subject to doubt. More so then, how can one condone doubt when it used solely for the sake of convenience, when only doubt on this issue was used by the government of the day to misappropriate the National Bank! "Government involvement when the run on it threatened to decimate the group"

Come 1973, the operation of the Bank was pretty much the same except that the year started with the takeover of the Bical Bank, the only other Maltese-owned Bank at the time. 5 January, 1973 - Karmenu Mifsud Bonnici asks Cecil Pace to sign the deal with Dom Mintoff, or else face the consequences. The next day - on 6 January 1973 - Cecil Pace waited for the police to arrive, to then be taken to Kordin.

October, 1977 - Following four years of imprisonment and house arrest, Cecil and Henry Pace are then convicted for misappropriation, fraud and forgery. Cecil Pace is sentenced to 14 years, and his brother Henry to years. According to a Court registrar overhearing a telephone conversation between the presiding Judge and Dom Mintoff, it is Mintoff himself who gives the blessing for the maximum sentence allowed (See: http://www.maltatoday.com.mt/2003/11/02/bical_1.html). I would not like to get distracted by going into the merits of this case, however, the fact that Bical Bank failed and that a number of depositors were then unable to withdraw their money did lay the path for the events that would take place later on that year. It takes no genius whatsoever to understand that if a bank on the island of Malta were to fail and leave depositors without their money, that the rest of the islanders will be most wary of any future events that could place them in the same position. How the run on the National Bank actually started is not known, however it is not uncommon for rumours to run rife and as we know from markets around the world, expectation creates the reality. So much so that if for example everyone expects the price of butter to go up, then the expectation in itself creates (at least for some time) the reality. It was for this very reason that the duties of the Central Bank of Malta were specific and that amongst others, it was duty bound to act as lender of last resort. The Central Bank of Malta Act of 1967 did not stipulate in any way whatsoever, that which Lino Spiteri is implying, i.e., that government would lend under the condition that the prime minister felt that there was adequate security.

Apart from the fact that the National Bank of Malta at the time could have offered its own shares as security as well as the Lm8,000,000 in long-term securities held by the group at the time, government refused to provide. The Mintoffian lie, is that by doing so they would like to come across as if they acted in the public interest. That they did not put public finances at risk and as a result were responsible in their protection of public finances. The truth however is that the law at the time obliged the Central Bank to perform and by refusing to do so, it betrayed the whole banking system and tossed this very profitable enterprise into the hands of government. Of course, most people would not know these details and are not familiar with how banks work. They do not understand that in creating money, a bank relies on the fact that people will not all call in on their deposits at the exact same time and that Central Banks around the world were set up to offer an otherwise notoriously fragile system this necessary security. The truth here is that National Funds were withheld when they were duty bound to come forward. It is unbelievable that Spiteri, who was there from day one when, on the 6 December 1973, he was the first person from the Central Bank to call a meeting with the National Bank of Malta delegation, can say that Dom Mintoff was actually worried about the run and did everything he could to save it. To any average person, the fact that the Central Bank refused to act as lender of last resort on the basis that he did not think it correct to risk public finances (when he was duty bound by law to do so), is ridiculous. Not only - hindsight then gives us the benefit to review the facts and see that all the Central Bank found which was irregular (but not remotely breaking any law in any way) was the bank's exposure to the property market, which also with the benefit of hindsight was the best investment anyone in Malta could make from 1973 to date. Facts speak volumes for themselves and on 10 December, Mintoff sent for the National Bank of Malta officials and followed the following series of events:

Meeting is held at 3.00pm at Castille

 He tells the National Bank delegation that he wants the shares of the bank transferred for free to the government of Malta by 5.30pm of that day. He threatens that unless he does he will declare a "Bank Holiday" as empowered to do by the Central Bank Act. Mintoff himself, personally, refuses to allow the Central Bank to act as lender and refuses the offer from Midland and National Westminister banks to lend any necessary funds. Mintoff then asks Dr Edgar Mizzi to draft the following instrument for the transfer of shares. In the second meeting called by 'We the undersigned hereby authorise the Board of Directors of the National Bank of Malta Ltd to transfer to the government of Malta all the assets of the Bank in consideration of the assumption by the government of Malta of all the Banks liabilities and undertake to do all that may be necessary in order that such transfer be effected'. Mintoff then threatens the removal of limited liability to cover deposit withdrawals. Mintoff then threatens further to remove Lm4,000,000 of public finances held in The National Bank of Malta unless the shares were signed over. Panic stricken that they would not only be losing the bank but also their homes in the process, some shareholders started to rally the troops to collect the much-needed signatures. These shareholders fail however to get the 65% majority of shares required to pass the extraordinary resolution. On Wednesday 12 December 1973 at 2.00am, the Directors were informed that the bank would be taken over by government by virtue of section 18 of the Banking Act and that the Bank's license would be suspended, and that Lino Spiteri had been appointed to take charge of the assets of the National Bank of Malta.

 Act VLX 1973 was passed and the board of Directors were removed by government although the 65% majority share transfer was never ever collected. In March of 1974, the government then invests Lm3,000,000 and in the new enterprise now known as the Bank of Valletta with an authorised share capital of 6,000,000 split between the government of Malta and the Malta Development corporation on a 60/40 basis. In the aftermath of this unprecedented abuse of public power in the alleged name of the national interest, the ousted directors of the National Bank of Malta sent a letter to their shareholders explaining the events that led to their demise and explained that while it was the shareholders' individual choice whether to transfer the shares or not for no value whatsoever over to the government, that as bankers they felt compelled to protect the interests of all the Maltese depositors and the customers of the bank and that they acted in all their capacity to avoid the suspension of the bank's activities and to give full assurance to the depositors in the interests of Malta and our fragile economy. I am certain, that everybody with a logical mind can differentiate between what I am saying and what Lino Spiteri is implying. Merely saying that the General Manager of the National Bank told the prime minister "take it, take it", is simplistic and ridiculous at best. How can anyone, really write and expect to be credible when saying that a banking group established since 1946 after having amalgamated with Scicluna's Bank to form the most consolidated group of Maltese capital and only three years before having incorporated the business of B.Tagliaferro and Sons (at the time Malta's largest property holder) and after having its most successful years to date (1972-1973), make himself believe that the Prime Minister at the time only took it over for free because the manager begged him to do so. Nobody, in his or her right mind, would have ever given up their shares for free unless there was the very real threat that he would lose much more by keeping them. The threat of the removal of the limited liability was the abuse of power of the then

Prime Minister who acted maliciously, only to be aided and abetted by his parasitical henchmen. Given the threat, some shareholders yielded, however can you really blame them as not only would they have lost their bank but probably their homes and personal effects in the process too. The ones that did not were then punished in other ways. In the same letter, the Board of Directors explained how they expected the relevant figures on the balance sheet to come forward, whereby they could then properly assess their value after the events that let to the run. This information was later produced, however, and in the most simplistic way possible, the auditors appointed by the council of administration for the purpose reported that the erosion of the capital of the National Bank, took place due to an arbitrary 300% increase in the provision for the bank's bad and doubtful debts, on the basis that the bank was too heavily exposed to the property market and as a result the bank was worthless as it had invested too much in Maltese property. Incredible but true, and despicable, to say the least. "The third factor concerns legal actions taken by former shareholders of the National Bank" In his final point, Spiteri comments now, not on the realities of the events but on the court cases that followed. He says it is a shame that the case has not been settled, yet not because he has any moral responsibility towards the rule of law but only to throw a punch at the Nationalist administration that after having championed the cause of the expropriated victims to gain political mileage, they have been left out in the cold by the ones the shareholders had looked to for assistance. That I can actually find myself agreeing with Spiteri on this point, only adds further to the insult and injury. That the Nationalist party, like Pontious Pilate, makes this seem like a Malta Labour Party affair is another lie. In fact, the shame of Dom Mintoff and his government is now no greater to that of the Nationalists, as both have profited from it in the name of the Republic. Just a few years ago, when the Bank of Valletta was supposed to be privatised, were tentative offers of potential out of court settlements underhandedly put to the shareholders through

certain entities... while however refusing to make it official in case the deal did not go through and potentially exposed to admitting that compensation was due. Growing up, I have lived in Malta and around the hypocrisy that this story exposes. The Mintoffian administration took the asset on the basis of a lie, while the subsequent Nationalist administrations stand back and idly take advantage of the situation on two counts. For one, they accuse the Labour party of abuse and foul play... while on the other hand they make hay out of the financial benefits that the foul deed brought to government coffers. On this note I have only one thing left to say. Irrespective of the evidence collected and the eventual verdict, the National Bank of Malta, founded by my great-grandfather, was stolen. Both sides of the Republic applauded, and the rehashed Bank Of Valletta is now their proudest boast. The Republic grows, and the Bank of Valletta with it, yet the shame of these events are engraved in our country's history. And on this note, I will leave Lino Spiteri and any others with this very real challenge. Bring anyone from any political camp or creed and let us debate the issue. The National Bank of Malta was stolen and still languishes in the Maltese courts without a verdict 38 years later. Therefore, the challenge goes out again, anytime or any place that lets the truth come to light. Only he who has things to hide operates under darkness. Jeremy Cassar Torregiani is a shareholder and a grandson of the Central Bank's founder.